Yesterday the major indices closed mixed. The Russell 2000 closed down 5.6 points at 1128.90 and the S&P (+1.40 points) and Dow 30 (+26 points) made another round of new all-time highs while the NASDAQ Composite finished down -5.4 on the day.
Summer comes early for the markets
Historically the summer months are the slowest of the year, but with the S&P 500 up as much as 189% from its March 2009 lows and up 20% from last year to today, no one is in a hurry to get long or buy stocks. The markets also tend to be much more choppy in the summer months.
Adding to that is the declining Russell 2000 that seems to be better connected to the slowing economy. I have always said that the U.S. stock market is being “supercharged” by the Fed’s continued quantitative easing/bond-buying programs and there is an idea out there that as the economy slows, so will the Fed’s taper process.
The continuation of the process will lead to higher rates and inflation, which will be a big setback for the economy and the markets as a whole.
These concerns haven’t caused the S&P and Dow to stop their relentless push higher, but they have resulted in unprecedented thin volume and low breadth, meaning fewer stocks are driving the advance, while more of them stagnate or drop. The party may not be over, but fewer people are out on the dance floor.
The Asian markets closed mostly higher and in Europe 9 out of 11 markets are trading lower. Today economic and earnings scheduled start with the motor vehicle sales number, Gallup US ECI, factory orders,, Kansas City Fed President Esther George speech on monetary policy in Breckenridge, Colo., and earnings from Dollar General Corporation (NYSE:DG), Ambarella Inc. (NASDAQ:AMBA) and Ascena Retail Group Inc. (NASDAQ:ASNA).
S&P up 7 of the last 8 sessions
It doesn’t matter if it’s Mutual Fund Monday or Turnaround Tuesday, the S&P is going up. It has become so one-sided the short sellers have gone on vacation. That said, I really believe the E-mini S&P futures will make a high this week.
Can it get stretched out to 1940 -1950? Sure it can, but I really think some type of pullback will occur this week.
Our view: With the S&P up so many days in a row, we lean to selling the rallies. Most of the buy stops have been hit and the downside stops are starting to build up again.
As always, please keep an eye on the 10-handle rule and please use stops when trading futures and options.
- In Asia, 7 of 11 markets closed higher: Shanghai Composite. -0.04%, Hang Seng +0.91%, Nikkei 225 +0.66%.
- In Europe, 9 of 11 markets are trading lower: DAX -0.25%, FTSE 100 -0.37% at 5:30 am CT
- Morning headline: “S&P 500 Seen Lower; Up 7 of the Last 8 Sessions”
- Fair value: S&P -1.89, Nasdaq -0.66, Dow -10.65
- Total volume: 1.05mil ESM and 5.4k SPM traded
- Economic calendar: Motor vehicle sales, Gallup US ECI, factory orders,, Kansas City Fed President Esther George speech on monetary policy in Breckenridge, Colo., and earnings from Dollar General, Ambarella and Ascena Retail Group.
- E-mini S&P 500 1920.25-1.75 - -0.09%
- Crude Oil 102.15+0.02 - +0.02%
- Shanghai Composite0.00N/A - N/A
- Hang Seng 23146.311-144.729 - -0.62%
- Nikkei 22515048.53+14.28 - +0.09%
- DAX 9919.74-30.38 - -0.31%
- FTSE 1006836.30-27.80 - -0.41%
- Euro 1.3614
